Home/ Companies / No major fall in property prices post-GST rollout: report

Mumbai: Goods and services tax (GST) was expected to bring down housing prices but hasn’t, a joint report by consultants JLL India and PwC said.

The report titled ‘Impact of GST on Residential Market’ released on Tuesday said businesses were expected to pass on the benefit of lower taxes under GST. However, price benefits out of GST-led cost savings are likely only in the “distant future", it said.

Though GST on property is 18%, the effective rate is 12%, thanks to abatement provided on land value. Before GST, the rate was 10-15%.

Given the slow reach of GST awareness amongst contractors and low level of compliance in initial stages, the benefits of reduced cost, by virtue of input credit being passed on by such contractors, is yet to be realised by developers, the report said.

“The tax reform which is also referred to as Good and Simple Tax, is aimed at reducing the final prices for the consumer, but this will depend on market forces and the effectiveness of the measures that the government takes from an anti-profiteering perspective," the report said.

Apart from input tax credits which should bring down construction costs, cost of land makes a big difference to property prices.

“In projects where the land cost is low, the savings can be significant and close to the estimated savings. However, where the land cost is high, the savings on account of GST may not be significant," it said.

According to Ramesh Nair, chief executive officer (CEO) and managing director, JLL India, the specifics of implementing GST must be addressed swiftly.

“The government has issued certain circulars to set clarity in this sector, however, the need of the hour is to set up discussion forums across locations and engage with tax authorities and developers at different levels. This alone can address the concerns of this sector which plays a significant role in impacting the overall sentiment of the economy," Nair said in the report.

Buyers of affordable homes are expected to benefit most as compared to other segments like luxury and ultra-luxury, the report said.

It also pointed to considerable lack of clarity and awareness not just among developers, tax payers and buyers, but also among tax officials. “This can not only lead to unnecessary litigation, but also result in precious working capital getting locked due to pre-deposited disputed taxes," it said.

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Updated: 18 Apr 2018, 12:28 AM IST
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